Peermohamed, Business Standard
Bengaluru, 28 December 2016
year 2016 will go down in history as a tumultuous one for India's new
economy companies that utilise the reach of the Internet to do
business. The year started off on a low in terms of funding and
valuations of start-ups, carrying over a sentiment of excessiveness
from the previous six months.
It was a contrarian 12 months, with every expert under the sun saying
that the fundamentals of the market — growing Internet penetration,
increasing per capita income, a strong economy compared to a weak
global market — remained extremely strong, yet companies riding on this
wave were being punished.
This neglect from investors finally culminated when Sachin Bansal and
Bhavish Aggarwal, two of the biggest poster boys for India's start-up
ecosystem, passed on the blame to foreign competition which came into
the country with pockets full of cash. To their dismay, the red carpet
treatment for foreign firms isn't going anywhere, with Chinese
big-daddy Alibaba planning to make an entry soon.
"My concern would be that 2017 may be a resurgence of aggressive
pricing and discounting. It's great for advertising and the media, but
from the point of view of the sustainability of business, from the
point of view of having a healthy consumer business ecosystem, you need
a balanced approach," said Devangshu Dutta, chief executive of Third
Eyesight. "Just purely from a capital availability point of view and
ability to spend point of view, Flipkart and Snapdeal would be at a
The year began with Prime Minister Narendra Modi's big push for
Start-up India with announcements of a fund of funds, incubation
centres and promoting local start-ups across the country. But as the
year came to a close, Modi's move to scrap large value currency hit
start-ups as business slowed across industries.
However, one bright spot was digital payment companies such as Paytm,
Freecharge and Mobikwik which benefitted immensely from the move, with
their user bases and the number of transactions on their platform going
up in instantly.
Growth in digital payments, considered the backbone of e-commerce
globally, could turbocharge the rest of India's Internet ecosystem.
Experts have dubbed 2017 the year of FinTech in India, with the
government's digital push helping grow and giving rise to secondary
digital finance companies that deal in lending, helping consumers
invest in capital markets and those that offer services to small
businesses for handling the day-to-day running digitally.
Going into 2017, it is to be seen if the confidence in India's start-up
space returns. While angel investments have remained strong, the
transition to Series A and further rounds needs to pick up steam.
Consolidation in sectors such as e-retail, grocery delivery and food
tech could give investors more confidence to return.
The focus on the scale will continue, however. "VC's today are looking
at how quickly can you add your first customer, your millionth customer
and your 200 millionth customer. India is a volume game, if you do not
get your 10 million customers in 6 months time they feel you have lost
the game," said K S Viswanathan, vice president, Industry Initiatives,
in Business Standard)